Summer Internship Project

An analysis on creating Profit Margins in E-

commerce and TV Retail of India
for

Submitted in Partial fulfilment of MBA Program

(2013-2015)
Company Guide Submitted by
MR.ASHISH GUPTA ABHISHEK TIWARI
(Senior Executive) MBA
HOMESHOP18 (MARKETING+IB)
NOIDA IMS, DHERADUN
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He/She has completed his/her project work entitled Homeshop18: An analysis on

creating Profit Margins in E-commerce and TV retail of India under my guidance.

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This project fulfils the requirement of the curriculum prescribed by this Institute for
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 ACKNOWLEDGMENT

Doing a project work this nature is an arduous task in

itself. I was fortunate enough to get support from a large
number of persons to whom I shall always remain grateful.

Express my thanks to the HOMESHOP 18 for

providing me a great opportunity to work as a summer
trainee in their organization and to learn great deal about
how market actually works and its intricacies.
I am thankful to Mr. Ashish Gupta and Mr. Nitin Mehta (HR
Manager) for their continued guidance and help.
I am highly thankful to all my professor notably Ms.
Ashulekha Gupta for helping me in my project work by
providing me all information needed and guiding me in
making directing and helping me which make the process
very easy.
Executive Summary

In today’s competitive world while entering in the market it is very

necessary to have good knowledge of the potential of a particular
market. The information regarding the activities of competitor’s
existing in the market so that we can plan our each activity according
to that. It is also necessary to retain the existing customers apart
from attracting the new customer.

The Project is concern with Homeshop18 (An

analysis on creating Profit Margins in E-commerce and TV Retail of
India ). The project included as part of MBA Programme and the
project is done from -------------------

 Objective:-

The Primary objective of study was to

How to increase more profit of homeshop18 and make the service
more effective than its Competitors.

The Secondary Objective Was Cost Cutting in the Process Of

Estimating Bag Size.

CONCLUSION:-
 It was concluded that Homeshop18 is an online and
on-air retail and distribution venture of Network 18 Group,
India.

The television channel established

HomeShop18's foothold in Indian retail because of high
television penetration. Later the internet reach grew all
over the country.
LIST OF CONTENT:-

S.no Page no.

. Subject
1 Objective

2 Introduction

3 Methodology

4 Analysis

5 Finding, Conclusions, Recommendations

6 Appendices
OBJECTIVE:-
Profit margins Determine Whether
Businesses sink or swim and this is especially true in the
hypercompetitive E-commerce industry. In This competitive scenario
there are many Competitors in market in e- commerce sector with
their own service and company policy. To be in Market as a Growing
Company there has been must require to Search a way by which We
(HOMESHOP18) Can Creating More Profit in E-commerce sector.

So what can retailers do to improve profit margins?

There are a myriad of barriers that online retailers face and it can be
difficult to respond adequately to them all.

The top five price related issues that they must address are:
increased price competition, consumer price sensitivity, the need to
protect the brand’s price image, increased price transparency, and
improving return on inventory investment.

It may seem like a daunting

task to address all of these issues, but a solid pricing strategy can do
just that.
Standard profit margins for retailers can vary widely, but generally
are between 20 and 50%. Improving profit margins is on the top of
the list for retailers and pricing strategies are central to reaching that
goal.

Only 27% of retailers said that their pricing strategies were effective,
while 62% said that they were somewhat effective, and 11% said
they were ineffective. How can retailers overcome these issues and
optimize to increase profit margins?

These five tips that I find threw the analysis

of market and market research can help
them make it happen...

 Increase average order value with discounts:-

T HE KEY TO PROVIDING GREAT DISCOUNTS IS

MAKING IT ENOUGH SO THAT THE SHOPPER FEELS LIKE THEY’RE GETTING A DEAL.

The relative price is much more important than absolute or nominal

price. Retailers need to use psychological pricing to optimize for profit. While it
may seem counterintuitive at first glance, discounts can increase profit margins
for retailers if they make the minimum purchase higher than their average
sale.

Most shoppers (73%) are influenced by discounts. Free shipping is another

great way because consumers don’t want to pay for shipping and can justify
spending a little bit more to get it for free.

 Manage inventory:-
In order to sustain sales, all retailers must manage their inventory effectively.
Running out of a product should be avoided at all costs because 77% of
shoppers will leave your site for a competitor.

Inventory is highly correlated with profitability. There is a 77% correlation

between overall manufacturing profitability and inventory turns.

 Customer service:-
Customer service is incrediblty important for online retailers because
sometimes things go wrong, but many companies don’t have physical stores in
which disgruntled customers can get immediate support.

The way that call centers and email support handle issues makes consumers
more or less likely to purchase from that retailer again.

The majority (66%) of shoppers are willing to pay more for great customer
service because they know they’ll be taken care of no matter what happens.

 Dynamic pricing:-
Pricing strategy is essential to improving profit margins. Dynamic pricing is a
new and effective pricing strategy for the retail industry that allows businesses
to have flexible pricing.

There are many external factors that retailers must be able to react to, such as:
competitor pricing, site traffic, conversions, seasonality, and more. When
retailers include dynamic pricing in their pricing strategy, they are able to
better keep up with market fluctuations.

Doing this manually is a pain and 40% of retailers are planning to use cloud
solutions to implement a dynamic pricing strategy.

Dynamic pricing, when automated, helps retailers react quickly which is

essential given the frequency of price changes. Industry leaders like Amazon
and Wal-Mart re price their products anywhere from about every 10 minutes
to 50,000 times per month.

Other retailers are playing follow the leader, with 36% of

retailers planning to start using pricing software in the next
12 months. Retailers are catching on because there is a huge
opportunity at hand as revenue can increase up to 8% and
profits can see up to a 25% boost when using dynamic
pricing.
Most ecommerce businesses operate with a gross margin of
20 to 50 percent. That range may be greater depending how
you price individual products, what your overall product mix
is, what your sales channels are, what you pay for individual
products, and other factors.

You can generate the same

amount of overall profits with a 20 percent gross margin that
you can with 80 percent by selling a much higher volume.
Many marketplace sellers are pleased with a 20 percent gross
margin. Most have a very high sales volume and a very lean
operation that is highly efficient.
Introduction:-
Things are easier said than done! To
realize our dreams and that also in such a
grand manner is really a tough task. The
founders of Homeshop18 have probably
conquered their dreams with the amazing
success of Homeshop18.

Homeshop18 is something
which has really opened up the Indian e-
commerce market and that also in a big way.

HomeShop18 is an online and on-air

retail and distribution venture of Network 18
Group, India. HomeShop18 was launched on 9
April 2008 as India's first 24-hour Home
Shopping TV channel, where anchors
performed live demonstration of products on
sale similar to HSN or QVC in USA.

The television channel

established HomeShop18's foothold in
Indian retail because of high television
penetration. Later, as the internet reach
grew all over the country, HomeShop18
launched www.homeshop18.com which was
ranked as the #5 most trafficked
Ecommerce Portal in India by Com score
in July 2013.

HomeShop18 has
partnered with the best brand owners,
such as Reebok, Lee, Fabindia, Samsung,
Whirlpool, Videocon, Nokia, Spice and
many more to provide superlative quality
and exceptional value. HomeShop18 is
committed to providing a delightful and
dependable customer experience, through
entertaining and outstanding content on
TV & the Web and its high quality
captive customer sales centre. Its
customer-centric practices, including free
home delivery, multiple payment options and
15 days ‘no questions’ asked replacement
guarantee make shopping with HomeShop18
a smarter and a more convenient
experience.

Speaking on
association, Mr. Sundeepn Malhotra, CEO
HomeShop18 said “Today, HomeShop18 is
the name synonymous with value shopping in
India. We receive calls from over 3000
cities and towns in India and we are happy
to extend our services further to the
viewers of Sun Direct across the country.
Expanding our reach will help us break
language barriers and provide a superior
home shopping experience. And, what
better way to expand than to tie up with
leading DTH player Sun Direct, adding over
6.7 million households to our existing
reach.”
HomeShop18 offers amazing value
propositions with more than 450 brands
and 150000 SKUs, gives cash on delivery
option and free shipping in over 3000 cities
across India. Now customers of Sun Direct
can avail exciting range of products and
services offered at HomeShop18. For
details on HomeShop18 TV shows and its
various products, call 1800-1800-918 Toll-
free or log on to www.homeshop18.com and
pick great deals.
Investors

G S Home Shopping of Korea, the third largest

home shopping company in the world, has a
15% stake in the company. Network 18 has
the controlling stake of 51%.

Partnerships & Acquisitions

HomeShop18 has partnered with major

brand owners such
as Reebok, Nokia, LG, Motorola, Philips, Ka
ya and Godrej.
HomeShop18 acquired
CoinJoos.com, an online books, movies and
music retailer in August, 2011 for an
undisclosed amount. The acquisition is the
main contributor to HomeShop18.com's
Books catalogue.
 Television channel
The HomeShop18 television channel was
launched on 9 April 2008. The television network
can be currently seen on cable, satellite and
some terrestrial channels in India.
E-Commerce

HomeShop18.com was launched on 18

January 2011. Currently, HomeShop18.com
comprises 17 categories: Accessories, Baby,
Books, Cameras and Camcorders, Clothing,
Computer, Electronics, Footwear, Gifts &
Flowers, Health & Beauty, Home & Kitchen,
Household Appliances, Jewellery, Mobiles, Office
& Stationery, Toys, Watches.

M-Commerce:-

The mobile version of the HomeShop18.com was

officially launched on Android and iOS in the beginning
of the year 2013.

Scan N Shop - HomeShop18's Virtual

Shopping Wall
As a part of its mobile platform launch,
HomeShop18 set up SCAN N SHOP Virtual
Shopping Wall at Terminal 3 of Indira
Gandhi International Airport at New Delhi
(domestic departure wing). The virtual wall
comprises dynamic LED TV screens. Each TV
screen displays products on sale
accompanied by a unique QR code, which
people may scan to display the respective
product's details. The customers can place
their orders by scanning the QR code against
each item or over the phone, through Cash on
Delivery.
WHAT IS ELECTRONIC/ INTERNET
COMMERCE?

Even today, some considerable time after the so called ‘dot

com/Internet revolution’, electronic commerce (e-commerce)
remains a relatively new, emerging and constantly changing
area of business management and information technology.

By Internet commerce, we
mean the use of the global Internet for purchase and sale of
goods, services, including service and support after sale.
Internet commerce brings some new technology and new
capabilities to business, but the fundamental business
problems are those that merchants have faced for hundred -
even thousands - of years:
you must have something to sell, make it known to potential
buyers, accept payment deliver the goods or services, and
provide appropriate service after the sale.

The Internet --->

 - an efficient mechanism for advertising
and distributing
product information.
- enabling complete business transactions..

What is “E-Commerce”?

“… the use of the global Internet for purchase and

sale of goods and services, including service and
support after the sale. The Internet may be an
efficient mechanism for advertising and
distributing product information, but our focus is
on enabling complete business transactions.”
“… . Speaking broadly,
electronic commerce includes the use of
computing and communication technologies in
financial business, online airline reservation, order
processing, inventory management...”
Historically speaking, the best known idea in
electronic commerce has been Electronic Data
Interchange (EDI)… ”
Although their view of e-commerce has been
expanded to services and support after sale.
 “Electronic commerce is the symbiotic integration
of communications, data management, and
security capabilities to allow business applications
within different organizations to automatically
exchange information related to the sale of goods
and services.”

- Different Definitions of Electronic Commerce

Frederick J. Riggins and Hyeun-Suk Rhee gave their domain
matrix for electronic commerce as follows:

Improve
+
coordination with Market creation

existing trading to reach new

External
partners customers

cell 3 Cell 4

Improve Information

coordination with exchange to work

INTERNAL
internal business with new team

units members

Cell 2
Cell 1

Technology Enhanced Technology Facilitated

E-Commerce consist the buying and selling of
goods and services primarily the internet online
retail is decidedly convenient due to its 24-hour
availability global reach and generally efficient
customer service.
` E-commerce requires the careful
planning and integration of a number of
technology infrastructure components
E-business for commercial transactions Involves
supply chain management, e-marketing, online
marketing, EDI.

 Uses electronic technology such as:

 - Internet
 - Extranet/Intranet
 - Protocols
 Network of E-Commerce:-

 Business-to-business (B2B): e-commerce:

participants are organizations. Examples: Free
Markets, Dell and General Electric.

 Consumer-to-consumer (C2C) e-commerce:

participants are individuals, with one serving as the
buyer and the other as the seller. Examples:
Owners.com, Monster.

 Business-to-consumer (B2C) e-commerce:

customers deal directly with the organization, avoiding any
intermediaries. Examples: Amazon, Yahoo and Charles
Schwab & Co.
 Consumer –to- business (C2B) e-commerce;
involves when consumers band together to present
themselves as a buyer in group. Example:
www.planetfeedback.com.

 Model for E-commerce:-

 Search and identification

 Selection and negotiation

 Purchasing products and services

electronically

 Product and service delivery

 After-sales service
 Advantages of E-Commerce:-

Eliminate Travel Time and Cost

Locate the Product Quicker
Provide Detail Information
Lower Costs
24-Hour Availability
Provide Comparison Shopping
Improve the Accuracy and Speed for
Information
Gain New Customer With Search Engine
Visibility
  The Scope of Electronic Commerce:-

Electronic Commerce encompasses one or more of the

following:

 EDI
 EDI on the Internet
 E-mail on the Internet
 Shopping on the World Wide Web
 Product sales and services on the Web
 Electronic banking or funds transfer
 Outsourced customer and employee care
operations

Electronic Commerce:-
 Automates the conduct of business
among enterprises, their customers, suppliers and
employees anytime, anywhere.

HOMESHOP18 SUCCESS MANTRA:-

 GREAT CUSTOMER SERVICE:-Homeshop18

User Most Satisfied By it Services. Great Customer
Services Has Been its Hallmark.

 EASY TO USE OF WEBSITE, HASSLE

FREE PAYMENT SYSTEM:-The User Interface is
Sleek and Easy to Use.

 CASH ON DELIVERY/ CALL ON DELIVERY

MODE OF PAYMENT:-This has been Major
Instrument in Homeshop18 Success Mantra. Almost
65% of Its Sales Happen Through this mode. Cash on
Delivery Created Trust in Mind of Indian Customer.
Who always Weary of Making Payment Online.
  FOCUSED ON USER EXPERIENCE:- Every
Others E-commerce Site, Tried to Cram The Maximum
Amount of Information Possible into Every Single Page
Whereas Homeshop18 Providing Only the Relevant
Info.

Methodology :-

Packaging fee:- one of the fundamental cost

incurred in processing in order is packaging cost. the
cost comperisess of price all the material procured
sometimes the cost incurred in developing material
Cost of transporting the material and the cost of
holding inventory. Some of the primary material
procured up, outercotten ,poly bag, taps and bar code,
bubble role roles with the former three claiming
Majority expenss.In order to thrive in a competitive
market. A retail company must reduce the costs
incurred in processing an order, while at the same
time competing with competition product quality.
The price of poly bag can be broken into the following
pieces:
  Develop cost per price
 List of
 Cost of holding a reorder point
 Cost of holding inventory – Not applicable in
case of Homeshop18 since they have per
shipment basis payment commitment with
3PL

Not applicable In case of homeshop18 as they have a tie up

with 3pc on per shipment series.
We suggested new poly sizes in order to reduce cost .
Data for consumption is last 6 month was taken.

Then mapped poly bag to consumption per product

A new size was proposed

Penetration of new size was calculated. Proposition of a new

bag was plausible if the fixed cost (Development + holding re
order point cost) could break even against variable cost
(decrease in price due to smaller size saving within a time of
6 months.
Costs incurred and reduction Was Realized

Analysis:-

 E-Commerce Margin Analysis:-

Now let’s get to the fun part - online retail is near & dear to
my heart and this is the part that I really wanted to
answer. E-Commerce is an incredible channel because you
have the ability to:

Create the Retail Environment:-

Being online means that retailers have the power to
design the retail narrative that visually Communicates the
retailer’s story. Think about it - a brick and mortar retailer
will maybe remodel the story once every five to seven years.
With an online store - you can dynamically change the
homepage, create a new theme for the season, add “sub-
shops” for designs/styles, or with a little html & CSS you can
tell a totally different story.

Tell the story:-

Being online provides the retailer with the ability to tell the
product’s story to bring the customer in the world of the
retailer. Online Retailers can add “looks” to augment the
retail experience - the story enables online retailers to tell a
story that would be challenging for a brick & mortar.

Deeper Customer Insight:-

The luxury of E-Commerce is that we have an incredible number of

tools to track & analyze user Behavior in ways that brick & mortar
would only dream of. Although it’s challenging to nail down your
e-commerce analytics - it’s extremely powerful to have a detailed
customer profile to tweak your merchandising & promotion
strategies.

Regular Engagement:-
The era of using Facebook & Twitter to simply promote your
products is dead. Modern E-Commerce social strategies involve
crafting a narrative that makes your fans want to engage by NOT
talking about yourself. For example, a music blog will use a new
mix to engage fans & readers & then subsequently sell tickets to the
show after they are on the page.

This all leads up to the point of analyzing the costs

of the costs of E-Commerce and gather some insight
on the associated margins of online retailers. We are
going to look at the margin for e-commerce from two
different perspectives:

Traditional E-Commerce:-
A traditional online retailer is a store that purchases
products from brands at wholesale and then sells the product
to customers at retail. Online retailers that employ this
model are Nordstrom, Urban Outfitters, Huckberry, and
Tobi. The foundation of this business is based on the retailer
choosing selecting the best pieces from brands to put
together the right assortment of pieces that will most
strongly resonate with their audience.

Brand Direct E-Commerce:-

: This is the Uber-popular model championed
by Bonobos and Warby Parker that exploded onto the e-
commerce landscape in 2011. This model was enabled
primarily by the major foundational trends that I outlined in
- What is the next wave of innovation in e-commerce after flash sales and
private sales?

Based on the massive assimilation of Facebook (product) as a

daily tool for navigating the web, brands were finally able to
gain access to an audience that enabled them to gain a critical
mass of fans in order to build a stable customer base. By
designing and producing the products themselves, these
vertically integrated E-Commerce startups are able to earn
significantly more money per item than traditional online
retailers (remember in the traditional approach two different
companies need to make enough margin to support
operations & growth).

Traditional E-Commerce Margin Analysis

We are going to look at this first from the perspective of a

‘typical’ online retailer like Nordstrom or Urban Outfitters
(retail brand).

Wholesale Price:
This is the price of the product paid by the retailer to the brand for
the product – the product is purchased at Wholesale Price which
can be thought of as a 50% discount from the retail price in
exchange for volume.

Inbound Warehouse Fee: This is the cost of receiving the

goods from the UPS carrier at the warehouse, checking the items
against the shipping manifest, and putting them on the warehouse
shelves for quick fulfilment.

Storage Fee:-

When an item is received, it is not immediately fulfilled to the

customer (like is the case for a Private Sale site – when an order is
immediately ‘burned & turned’, it is received and immediately
packaged for fulfillment to the customer), the product is shelved
until an order is placed.

Outbound Warehouse Fee: -

When an order comes in, the items in the order must be picked from
the warehouse shelves and packed in shipping cartons (hence the
term ‘Pick & Pack’). This fee is usually a per order charge + a fee
per unit of the order, which covers the cost of having a person pick
the order and the packaging requirements of the order.
Outbound Shipping Fee: -

This is the fee paid to the shipping carrier to transport the item
from the retailer’s warehouse to the customer. For purposes of this
explanation, we are assuming that the retailer is using U.S. Postal
Service Flat Rate boxes that cover nationwide transportation of
the product for a set price.
We are going to look at this first from the perspective of a
‘typical’ online retailer like Nordstrom or Urban Outfitters
(retail brand)
 The carrier of choice for E-Commerce is usually UPS where
something like 6% of the US Gross Domestic Product is moving
through their system on any given day.
Brand Direct E-Commerce Profit
Margin Analysis

With all of the advantages of selling to major e-commerce retailers,

you might be wondering why would a brand want to sell consumer
direct – the answer is that it is a far more profitable transaction for
the brand:

As the iPhone integrated itself into the daily lives of the US

population and Facebook (product) drove the majority of
Americans to interact with the web, e-commerce was primed for
explosion. In late-2010, we saw that new startups were bursting
onto the scene to change the world.
What does the costing build look like
for a Homeshop18:-
Relation between weight and price of polybag:-

wei pri
ght ce
7.3 1.
1 55
16. 2.
95 94
25. 5.
43 04
38. 7.
22 24
45. 8.
7 31
11
64. .6
82 1

Density of ldpe 0.92 grm./cm3

Surface area 756 inch2, =l*b
Thickness 70 micron'
Weight 31.4105
 price 6.46972 7.14 0.670281678 1,84,603.62
Price =derive from
below equation ,,
WEIGHT=
Density * surface
area*thickness

Below equation showcase the relationship between

bagweight and bag price.

14
price

12
f(x) = 0.176924782256541 x + 0.263802576139083

10

6 price
Linear (price)
Linear (price)
4

0
0 10 20 30 40 50 60 70
Finding, conclusions, recommendations:-

Finding:-
Packging is the critical area for cost reduction tranisit safty
and as customer price.In Order to copup with incresing raw
material cost of packging.
Expect packging and warranty all others
considerd,important in decision making of online
purchases.the commercial used by homeshop18 are effective
enough to convey the message since the ad are interesting
enough to gain attention and position itself into the prospects
mind.

Recommendations:-
 Every parameter associate with packaging sku Should be
thoroughly thought threw and cost cutting must be done
where accessing packaging is involve .This is necessary to
create profit margin on a particular product. And in order to
ensure transit worthiness of particular product, any
additional saving should be re-invested into critical quality
parameters.

Suggestion:-
Homeshop18 has succesfully placed itself into prospects mind
making it the india largest online store with huge range of
product . but homeshop18 still needs to work on thier core
competence that is book and staionery items.
With the entry of Amazon.com it will
be huge competitive homeshop18 hence will have to position
itself better. Therefore they need to aggressive at providing
better services which can be fulfilled by reducing the delivery
time selling second hand products , which will increase
consumer affordability much more than enhance penetration
into market.
they can even have thier retail store which can give an access
to consumer to feel and analyze the products, wich will help
them win the consumer faith.
Price will still be a factor as Amazon being huge company
will use its economics of scale to remove their competitors
from the market ;therefore they need to be more competitive
on that aspect. Be very focused on consumer and build
amazing experience for customer.

Conclusion:-
 Packging cost can be reduced with the introduction of new
sku(stock keeping unit) given that the decrease the variable
cost breaks even the fix cost incurred in the development of
sku within 6 month. Cost of holding inventory can be ignor in
case payment to theird party logistic is being made at per
shipment basis.